Russia Equates P2P Cryptocurrency Transactions with Entrepreneurship: Expert Opinions

The Arbitration Court of the Rostov Region has ruled that P2P cryptocurrency transactions constitute entrepreneurial activity. This was reported by lawyers from the company Nextons.

Since 2020, the defendant has been an individual entrepreneur under the simplified taxation system (STS). In the 2022 declaration, he reported an income of 800,000 rubles. However, the Federal Tax Service requested information from banks and found that a total of 143 million rubles had been deposited into the entrepreneur’s accounts in 2022.

After meeting with agency representatives, the individual reported 92.4 million rubles in income from cryptocurrency sales in an updated declaration and claimed a property tax deduction of 92.6 million rubles. He did not submit supporting documents.

The tax authorities concluded that by buying and selling cryptocurrencies, the entrepreneur was effectively engaged in business activities. Consequently, all his income is subject to STS.

The claims highlighted the systematic and large-scale nature of the operations—92 bank cards, involvement of third parties, and use of foreign accounts. Evidence included witness testimonies and the entrepreneur’s own interrogation, where he described a scheme of buying cryptocurrencies in Turkey and selling them in Russia via P2P.

In his defense, the individual argued that such operations do not require registration as an entrepreneur, and income from the sale of digital currencies should not be included in STS. He also pointed to the absence of a separate OKVED for trading these assets.

The court sided with the tax authorities. According to the ruling, even in the absence of specific regulations, cryptocurrency is considered property, transactions with which are taxable, and systematic trading of digital assets with the status of an entrepreneur is regarded as business activity.

The defendant was also informed that combining simplified and general taxation systems is not possible, and the absence of a separate OKVED does not exempt him from obligations to the Federal Tax Service.

As a result, the tax authorities additionally charged the individual 5.46 million rubles in taxes under STS and 273,000 rubles in fines.

A Just Decision, but a Flawed Defense Strategy

In comments to ForkLog, experts acknowledged the fairness of the court’s decision. Ignat Likhunov, founder of the legal agency Cartesius, noted that the court referred to the norms of the Civil Code of the Russian Federation.

“If you become an individual entrepreneur, then all your transactions on personal accounts can be recognized by the tax authorities as entrepreneurial if there is systematic activity and a profit-making intent combined with not using the resold property for personal purposes,” he noted.

According to Likhunov, the court confirmed that in Russia, taxation from cryptocurrency sales is conducted under the rules for selling other property. Furthermore, an entrepreneur under STS cannot expect deductions on PIT.

“This court decision, as well as our legislation in general (Civil and Tax Codes), is essentially applicable to any P2P trader, exchange service, or cryptocurrency exchange. In their activities, one can formally find tax underpayments or illegal entrepreneurial activity. However, the practice of prosecuting ordinary cryptocurrency traders, as in this case, is virtually nonexistent. These are isolated cases,” the lawyer noted.

Exved CEO Sergey Mendeleev also agreed with the legality of the court’s decision.

“From the state’s perspective, such activity is undoubtedly entrepreneurial. Is there regularity? Yes. Is there income generation? Absolutely. What you trade—crypto or pine cones—is a secondary issue. Moreover, it doesn’t matter whether you are an entrepreneur or not. The tax authorities can easily charge additional taxes to an ordinary individual,” he explained.

The expert believes that the defendant should have contested not the essence of the accusation but the amount of the additional tax charge.

“Okay, let it be entrepreneurship. Here are all my statements, I bought crypto for 990,000, sold it for 1 million. My income is 10,000, so tax me on that, not on the turnover. In this part, of course, one cannot agree with the decision,” Mendeleev concluded.

In November 2024, a law on cryptocurrency taxation came into force in Russia. Cryptocurrency is recognized as property in this law. The tax base is determined as the excess of the asset’s value over the costs of its purchase or mining.

Individuals selling cryptocurrency are required to pay PIT at a rate of 13-15%. Legal entities are subject to a 25% profit tax.